Archive for May, 2012

RESP Investing In Your Child’s Education-The Basics

Posted: May 31, 2012 in Finance
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Registered Education Savings Plan : The Basics

What is an RESP?

Being concerned about how to afford a college education for my son, I made some enquiries about a Registered Education Savings Plan, or RESP.  This is a special savings account that makes provision for post-secondary education costs. If you are like me savings and investing are very important to my family. Those who subscribe to a RESP are also entitled to receive the government’s Canada Learning Bond (CLB) if they qualify, and the Canada Education Savings Grant (CESG) which, as I found out, can provide a welcome boost to the funds.

Who is it for?

An RESP is set up to provide financial support for those aged 17 years and over, and who are undertaking eligible courses of study.  Contributors to a RESP are normally parents or guardians; however, a grandparent, other relative or even a family friend can also make contributions.

wagner51's own temporary SIN card, scanned and...

How do you get one?

A simple two-step process helped me to get things underway.  First of all I checked out my Social Insurance Number (SIN), and then I chose an RESP provider.  My SIN gave me access to government benefits and programs and, when I began to research RESP providers, I found there were a number of options – I could go to a reputable bank, credit union, umbrella company, or other financial institution to get the process started.

Make sure you research who you decide to go with as you will be with them for a long time and they will be managing your contributions.  Know what questions to ask each provider and get the answers before you proceed. Ie: fees involved and any penalties.

What does it do?

An RESP will provide your child with funds towards the costs of a course of study.  The course must be at least three weeks long, and have a minimum ten hours of work or instruction per week to be eligible as a full-time course.  This program can also cover part-time education, as long as at least 12 hours per month is spent on study.

When is it used?

When your child goes to university or college, takes up a place at a trade school, a CEGEP, or at some other institution that is certified by the Minister of Human Resources and Social Development, the RESP can be activated.  Alternative arrangements for children who don’t take up educational courses beyond high school should be discussed with your RESP provider.

Advantages

Getting access to the CESG is a major advantage of having a RESP; the plan acts like a tax shelter, as contributions will have been paid at the time funds are deposited.  In the case of the CESG, the government will pay a percentage of funds saved directly into the RESP.  The actual amount available will depend on the net income of the family up to a maximum $7200.

Families with lower incomes can additionally benefit if they are eligible for the Canada Learning Bond.  For example, if you already receive National Child Benefit you could benefit from a lump sum deposit when you start your RESP plus an annual contribution thereafter.

The use of an RESP can also give you a clear goal to budget your money towards. Setting up a direct debit can ensure a regular amount is paid into the RESP. Having all of your finances recorded and accounted for can also allow you to budget sensibly and see where you are spending unnecessarily. Keep all of your receipts and analyze your spending, this will allow you to see where your money could be better spent. Setting yourself a weekly spending amount is also useful. Try to pay using cash; using cards is far too easy, allowing you to quickly go over your limit. Remember to always shop around for the best bargains, looking online allows you to compare prices from a number of retailers, and there are often coupons available for all sorts of products.

There are further financial incentives depending on where you live.  In Alberta we have the Alberta Centennial Education Savings (ACES) grant, which contributes a lump sum for babies where a RESP is in place, then annual additions at certain ages throughout the school years.  In Québec there is a similar incentive to save for future educational needs.

Disadvantages by Mr.CBB

I believe all parents should set up a registered education plan for their child as education in an investment worth investing in and so is your child.

For further help and information check with Human Resources and Skills Development Canada or your RESP provider – remember this can be a bank, credit union, or other financial body.

This has been written by Katie Green, who is a freelance writer with an interest in business and finance related matters.

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Maternity and Parental Leave Part 1 – The Basics

Posted: May 30, 2012 in Maternity Leave
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Even if you have the easiest baby in the world, maternity or parental leave won’t be the blissful paradise you imagined if you’re constantly stressed about your reduction in income. In this two-part series I’ll outline how the benefits work, and how you can make them work for your budget.
Maternity and Parental Leave Benefits in Canada
Unless you work for a company that offers an income top up programs or paid maternity leave most parents on leave will only receive basic maternity benefits, which fall under Canada’s Employment Insurance program.
While many people refer to the year a mother takes off after the birth or adoption of a child a maternity leave, it’s actually a combination of two leaves. The first leave is called maternity leave, and is only available to birth mothers and surrogate mothers for up to 15 weeks.
After the 15 weeks, the leave is now called parental leave. This cheque can be collected by either the biological or adoptive parents for up to a maximum of 35 weeks.These benefits can be claimed by one parent or shared between the two partners, but cannot exceed a combined maximum of 35 weeks.  
Parental leave benefits must be claimed within the 52 weeks following the child’s birth, or for adoptive parents, within the 52 weeks from the date the child is placed with you. 
Leave payments are capped at 55% of your average insured earnings up to a yearly maximum insurable amount of $42,300 $45,900 as of January 1,2012.
This places the current maximum payment at $447 $485 per week. You could receive a higher benefit rate if you are in a low-income family earning with a net of $25,921 or less per year – be sure to check into this. Your payment is a taxable income, meaning federal and provincial or territorial taxes will be deducted.
How to make extra money while on Maternity leave?
Working while on leave can be a good way to earn extra money. It doesn’t make financial sense to work while on the maternity portion of the benefit, as your earnings will be deducted dollar for dollar from your benefits, unless you make significantly more than the benefits (after the cost of child care is deducted, if needed).
If you work while you’re receiving a parental leave benefit, you’re allowed to earn $75 per week or 40%. This was changed as of August 2012 to $50 per week or 25% of your weekly benefits whichever is higher. Any income earned above that amount will be deducted dollar for dollar from your benefits. 
Update: Oct 18,2012- There is  now a New Pilot Project In Place in which they are currently making changes to. Review this pilot project for any changes to the above as it may affect you.
New Pilot Project:  Once the waiting period is over earnings are deducted at a rate of 50% of each dollar earned up to 90% of the weekly insured earnings used to establish the benefit rate.
After you reach the 90% threshold money is deducted dollar for dollar. As of January 2013 you will have the option to stay with the current pilot project or revert to the old pilot project if you are an eligible claimant during the period August 5,2012- August 1,2015.
Check out Part 2 In this Series: Maternity and Parental Leave Part 2: Budgeting
Post Contribution By: Sarah Deveau is the author of Money Smart Mom: Financially Fit Parenting. Reach her at  Money Smart Mom.

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